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tung Do

Forex and interbank market remains stable in H1

In the first 6 months of 2021, the forex and interbank markets in Vietnam maintained a stable trend and are forecast to continue to be stable for the remainder of the year.

STABLE FOREx MARKET

Vietnam's currency continued to maintain strength in the first half of 2021 with a slight increase of 0.3 percent against the USD in the context of abundant foreign currency supply and demand as well as low international pressure. Although the balance of trade in goods saw a deficit of USD1 billion, other foreign currency supply components were still positive such as FDI disbursement reaching USD9.2 billion (up 7 percent over the same period), and successful M&A deals such as SK Group buying shares at VinCommerce (USD410 million), Alibaba buying shares at CrownX (USD400 million) or international bond issuance deals by Vingroup (USD500 million), BIM Group (USD200 million). )... In the international market, the US Dollar Index moved sideways in the range of 89-93 and basically did not create much impact on the domestic exchange rate.

In addition, it is not without mentioning the regulation role of the State Bank of Vietnam (SBV) towards more flexibility and close monitoring of the market developments. The SBV's policy of reducing the forward price by 150 points to 22,975 (~0.6 percent) in early June was a reasonable change in the context that many currencies in the world tended to appreciate against the USD since the beginning of the year, the domestic foreign currency supply was abundant and confidence in the value of the domestic currency strengthened.

In the second half of the year, the USD/VND exchange rate is forecast to remain stable. Foreign currency supply and demand are expected to continue improving as the balance of trade in goods returns to surplus, and foreign investment capital steadily grows, etc. along with the flexible and responsive regulation by the State Bank. These will be important factors that support the stability of the exchange rate. The USD/VND exchange rate is forecast to fluctuate by 0.5 percent compared to the level at the end of the second quarter.

INCREASING INTERBANK INTEREST RATE

The VND interest rate in the interbank market increased sharply in the first 6 months as overnight to 1 week terms increased by about 80-100 points to 1. 1 - 1.3 percent/year from 0.2-0.3 percent/year. Interest rates were still supported by the SBV's easing monetary policy with solutions focused on supporting businesses to boost the economic growth. The strong credit growth and weaker capital mobilization caused the interest rate level in market 2 to increase. According to the General Statistics Office of Vietnam, as of 21 June, capital mobilization only increased by 3.13 percent (compared to 4.35 percent of the same period last year), while credit growth was much higher at 5.17 percent (compared to 2.45 percent of the same period last year).